Northrop charges that tanker bidding skewed toward Boeing

WASHINGTON -- A European aerospace company and its American partner charge that the Air Force is stacking the odds against them and favoring the Boeing Co. as it prepares to seek bids on a $35 billion contract to start replacing the nation's fleet of aging aerial refueling tankers.

"This is tantamount to a cost shootout that accelerates the race to the bottom," said Mitchell Waldman, a Northrop Grumman vice president, arguing that the Air Force has decided that cost is the overwhelming factor and that it doesn't matter how good a plane is. In the last contract bid, he said, the Air Force indicated that it wanted certain new capabilities in the new tanker, but now it's just about price.

Waldman refused to say whether the Northrop Grumman-European Aeronautic Defense and Space Co. team would pull out of the competition if changes weren't made.

Boeing backers on Capitol Hill say, however, that it's a replay of the previous competition, when Northrop-EADS, with the help of Sen. John McCain, R-Ariz., pressured the Air Force to change the ground rules by threatening not to bid. Northrop-EADS won that competition, but the Government Accountability Office overturned the award.

Rep. Todd Tiahrt, R-Kan., charged that it's all part of a Northrop-EADS public relations campaign.

"They are repeating what they did last time," Tiahrt said. "They make complaints and threaten not to bid. I don't think the Air Force will fall in the same trap this time."

"We saw what happened when EADS demanded changes to the request for proposals last time," said Sen. Patty Murray, D-Wash. "The changes that were made to keep a foreign competitor at the table eventually led to the GAO ruling that the competition was neither fair nor transparent. The military can't go down that road again."

Others whose states would benefit from Boeing winning the contract agreed with Murray and Tiahrt.

"This is just posturing and an attempt to tilt the competition in their favor," charged Sen. Pat Roberts, R-Kan. "We have seen it before."

Rep. Norm Dicks, D-Wash., said, "Let them pull out."

For its part, Boeing said the last competition had been fought out "very publicly" and that it wasn't going to engage in a public relations war this time.

"Our preference is to allow the process to play out rather than work the requirements for the media," Boeing said in a statement posted on its tanker blog.

The deadline for commenting on the Air Force's draft request for bids was last week. A final version of what's formally known as a request for proposals is expected to be released later this month. The contract should be awarded sometime next year.

The initial contract will be for 179 planes, though the Air Force eventually needs to replace its entire fleet of roughly 600 Eisenhower-era tankers. The deal ultimately could be worth $100 billion, one of the largest contracts in Pentagon history.

The competition between Boeing and Northrop-EADS has been fierce. EADS is the parent company of Airbus, Boeing's chief rival in the commercial airplane market.

Boeing would use its 767 model for its tanker's airframe. The 767s are assembled at the company's plant in Everett, Wash. They could be converted into tankers in Wichita, Kan., but a Boeing official previously said the company would consider other sites as well.

The Northrop-EADS tanker would use an Airbus A330 airframe. The initial six or so Northrop-EADS tankers would be assembled in Toulouse, France, and the others at a new factory they've promised to build in Mobile, Ala. Construction on the new plant hasn't started.

Though the largest part of the tanker will be the Airbus A330 airframe, Northrop, an American defense company, is the lead contractor on the team rather than EADS. It's now referred to as an American tanker from Northrop Grumman, with no mention of EADS.

This summer, the World Trade Organization, in a preliminary ruling, found that Airbus had received illegal government subsidies to develop and launch the A330 and other aircraft it produces. The subsidies for the A330 have been estimated at about $5 billion

In a letter to the director of defense procurement at the Pentagon, Dicks said the Air Force needed to take the subsidy issue into account in the tanker competition. The Air Force, so far, has declined.

"In order to be fair, the request for proposals must be modified to neutralize the advantage that government subsidies give to one bidder," Dicks said.

Boeing won the initial tanker contract, but that was thrown out after a Pentagon procurement scandal that involved the tanker. Northrop-EADS won the second competition, but government auditors tossed that one out.

Boeing hasn't said anything publicly about the comments it submitted on the draft request for bids.

Waldman and other Northrop officials made clear at a news conference last week that they thought that the Air Force had made crucial changes in the request for bids this time that put their company at a disadvantage. The new request for bids is "vastly different" from the one in the last competition, he said.

Among other things, Waldman said, bidders will have to meet 373 mandatory requirements that range from fuel off-load capabilities to the number of bathrooms and crew bunks on board. The problem, Waldman said, is that all those requirements will be weighed equally, even though some are clearly more important than others.

In a letter to Defense Secretary Robert Gates, Sen. Richard Shelby, R-Ala., and seven other Alabama lawmakers charged that the Air Force's request for bids was "fundamentally flawed."

Shelby said the Air Force apparently didn't intend to do any risk analysis of the bidders' costs and schedules. Shelby also said the Air Force no longer was factoring in which plane could carry more cargo and passengers, as it did in the previous competition. The A330 is a bigger plane than the 767 is.

Waldman and Randy Belote, Northrop's vice president for corporate communications, declined to speculate whether Northrop-EADS would pull out of the tanker competition if changes weren't made in the request for bids.

"It's premature," Belote said. "This is a 50- or 60-step process, and we are on step five."

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